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Warehouse slotting is the process of organizing the inventory in a warehouse or distribution center. The overall goal is to make both picking and replenishment quicker, easier, and more efficient.
As a helpful analogy, imagine a workshop or a kitchen. You could conceivably pile all your tools or ingredients into random piles around the shop or kitchen. But then you’d be spending two-thirds of your time going back and forth searching for what you need. A better strategy would be to assign each item a specific place. Your most-used items would be right next to your workbench or countertop for ease of access, and everything would be picked up and out of the way.
If you can envision an organized workshop or kitchen, then you’ve already grasped the basics of warehouse slotting.
Warehouse slotting considers the item velocities, dimensions (cube size), weights, product groupings, and more to determine the ideal warehouse setup. Of course, things get more complicated when we consider a full warehouse and not a workshop. You’ll deal with many more items, increased constraints, and a larger area to organize. Warehouse slotting goes beyond simply finding empty shelves or floor space for items as new inventory arrives. It needs to be part of your overall warehouse management strategy and geared to finding hidden efficiencies.
While the basic concepts of warehouse slotting are easy to grasp, truly efficient slotting is complex and requires some number crunching. Software equipped with warehouse slotting algorithms will help with the task. You can start with some easy calculations on a spreadsheet. As your operations grow, you should be ready to automate some of these decisions.
Inventory management and fulfillment tend to get a lot of attention in logistics circles, while receiving and put-away—sometimes known as “warehouse slotting”—are much less discussed (although we make receiving a prime focus of our “3 Stages of Controlling Warehouse Flow” white paper, available free for download).
That lack of discussion really is a shame, because few activities have as much effect on warehouse operations and efficiency as slotting does. This is the main reason why we love this piece, “8 DC and Warehouse Slotting Considerations for More Efficient Warehouse Operations” published by Cerasis on their blog.
Warehouse managers sometimes make a distinction between macro slotting and micro slotting. We prefer not to use these terms, but you might encounter them as you read up on slotting best practices. It’s a good idea to know what these terms mean.
Micro slotting refers to how individual items or pallets are placed in specific locations in the warehouse (from the zone on down to the specific shelf).
To avoid confusion, we’ll use “warehouse layout” for macro slotting. “Slotting” by itself refers to micro slotting of SKUs and groups.
When slotting is done successfully, you should have not only an efficient and optimized use of warehouse space but lower levels of handling and shorter travel times for your pickers, too. By some estimates, efficient slotting can save labor costs by up to 20%. Given that order picking usually accounts for anywhere between 40% and 60% of the man-hours in warehouse operations, those are savings that really add up…and it doesn’t cost a heavy investment in new equipment or new talent to get your slotting where it needs to be.
If you need to justify a project that looks at your current warehouse slotting, we offer these five additional reasons why warehouse managers take a closer look and overhaul their warehouse slotting strategy:
To figure out how to slot your items properly, you’ll need to gather data on each of your SKUs. We recommend that you collect the following data:
This data will inform how you go about your warehouse slotting strategy. Now, let’s cover each item in more detail.
SKUs that are picked by the full pallet will require a forklift, whereas single pieces won’t. It makes sense, then, to store pallets separately from cases or broken cases. Otherwise, forklifts will routinely get in the way of your single-item pickers. These workers are probably picking for retail, where time is critical.
Item level and storage also dictate what kind of equipment will be needed for picking (forklift, pallet jack, cart, etc.). Your pickers should know which kind of equipment is needed simply by the area in which the items are located.
If you have not yet determined an SKU’s item level and storage medium, you will need to do so based on its cube size and weight. Full-case items and palletized items are generally assigned to select racks. Broken cases will go on shelves.
Item velocity (see below) usually dictates where items are stored relative to the down-forward pick area. But excessively large or heavy items should be placed closer; moving those items will be more difficult and time-consuming. Many warehouse managers will take both into account using what’s called cubic velocity. Cubic velocity measures the average quantity ordered over time, product dimensions, and item level.
The general rule of thumb in slotting is, “fast-moving SKUs stay accessible and slow-movers stay out of the way.” In other words, you need to place your faster-moving SKUs closer to the down-forward picking area. This cuts down on travel time for your pickers.
Most warehouse managers will get some idea of item velocity using “ABC slotting.”
This is done by listing all the SKUs that have been fulfilled over a time period—usually 30 days. (A shorter or longer time might work best for you. We’ve seen it as short as 12 days.)
The list is then sorted by the number of line orders. The top 50% (i.e., the items with the most line orders) are designated as “A,” the next 25% as “B,” and the last 25% as “C.” (If there are items that didn’t make the list because they were not ordered within the set time period, those are flagged with a “D”).
These designations can now be used to arrange items by groups, with the “A” items closest to your down-forward picking area. Your “D” items will be farthest away.
If you can, don’t just get data on the past 30 days (or whatever time period). Try to think ahead and make predictions about what your order velocity will be going forward. If an item is becoming more popular or experiencing a seasonal surge (see below), that’s a reason to store it closer, even if trailing sales weren’t that high. The opposite goes if an item is likely to drop in sales.
Barbecue grills and patio furniture sell like hot cakes in the spring and early summer. Gift items, like wines and luxury soaps, sell a lot faster during the holidays. If you can predict seasonal surges in items, you can plan ahead and move those items closer to your forward picking area. (Our Allen Brothers case study, supplier of high-quality steaks and seafood, is a good example of predicting and accounting for seasonal variations.)
Finally, items need to be grouped together into zones based on their specific storage requirement. Some examples:
In some industries, almost every product will have special storage requirements. In many industries, though, there won’t be any pre-set requirements for most items. How do you create zones in this situation?
The most efficient way is to group items that are frequently ordered together (a.k.a. their “product affinity”). For example, men’s razors are often bought together with replacement blades and shaving cream (go figure). Gift wrap is bought with ribbon and gift bows. A nonfiction book on a given topic often accompanies 2-3 other books on that same topic. Grouping items typically bought together creates much shorter pick paths for your workers.
Once you have your products grouped into zones by storage requirements or product affinity, you are ready to start item replenishment. For this activity, keep a certain percentage of space in each zone open (i.e., empty slots). As a rule of thumb, you should have enough empty space in each zone to accommodate a month’s worth of replenishment activity (minus what you anticipate selling).
Especially for each pick (broken cases), there is a “sweet spot” that is easiest for pickers to see and reach. This area is between the chest and knees of an average person. This is where high-velocity SKUs should be stored for easiest access on your shelves. Slower-moving SKUs should be out of the way, with the heaviest SKUs being low (as close to the floor as possible).
Again, though the concepts are not difficult to understand, gathering and organizing the above data can be a hassle. Take product affinity, for example. There are dozens of posts on all the fancy ways to use this software package or the next to determine which products are frequently ordered together.
Even if you have all the data needed above, balancing the various factors can be tricky. For example, suppose you have a lighter high-velocity item and a heavier low-velocity item. Which saves you more: reducing effort by storing the heavier item closer to down-forward picking? Or keeping the lighter item closer because it sells fast? You’ll need a computer to weigh the various factors and determine which decision is more cost effective.
That said, you can get some traction on the problem by starting small with the storage medium and approximate item velocity using the ABC slotting method. Once you are ready for a more sophisticated algorithmic approach, or if you are looking to improve your warehouse slotting. Give us a call. We’ll be happy to help.
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